Criminal Defense Lawyers

Federal Nursing Home Fraud Charges – What You Need to Know

Last Updated on: 14th December 2025, 10:54 pm

Federal investigators are prosecuting nursing home owners and operators for Medicare and Medicaid fraud at devastating rates. If you own or operate a skilled nursing facility, you need to understand what federal prosecutors are looking for. Here is the first thing you should know: nursing home fraud prosecutions result in some of the longest sentences in healthcare fraud. Philip Esformes received 20 years in federal prison for orchestrating a $1.3 billion fraud scheme – the largest healthcare fraud case ever prosecuted by the Department of Justice. Kevin Breslin received 90 months and was ordered to pay $146 million in restitution for diverting funds from his Wisconsin nursing facilities. These are not theoretical outcomes.

Welcome to Spodek Law Group. We handle federal healthcare fraud defense cases regularly, including cases where nursing home owners first realize they are facing serious criminal exposure through exactly this kind of investigation. The second thing you need to understand is this: Congress created Medicaid Fraud Control Units specificaly because nursing home operators were treating Medicaid as there “own private ATM machine.” Thats the actual legislative record. Federal prosecutors view skilled nursing facility billing as one of the most fraud-prone areas in healthcare – and the sentences are devastating.

Heres something most nursing home operators dont realize about Medicare billing. The paradox is brutal. Facilities bill Medicare for skilled therapy while patients are asleep and unable to benefit from any treatment. Therapists document skilled services that were never actualy provided in any meaningful way. Evaluation time gets reported as therapy time to inflate reimbursement levels. And therapy mysteriously spikes at the end of measurement periods – not becuase patients suddenly need more treatment, but becuase facilities need to hit minimum time thresholds for higher RUG scores.

Therapy While Patients Sleep

Heres the uncomfortable truth about skilled nursing facility therapy billing. Some facilities bill Medicare for therapy provided to patients who were literaly asleep during the treatment. The DOJ is systematically targeting facilities that document skilled services that patients could not possibly have benefited from.

Therapists documented skilled therapy while patients were unconscious. Federal investigators discovered that nursing home therapists were recording treatment sessions for patients who were asleep, sedated, or otherwise unable to participate. Medicare paid for these “services.” The documentation showed therapy was provided. The reality showed patients who never knew it happened. Every such claim is false.

Evaluation time was reported as therapy time. When a therapist evaluates a patient, thats not the same as providing treatment. But facilities inflated there reimbursement by reporting evaluation time as if it were actual therapy. The initial assessment that should have lasted one session became the basis for billing multiple therapy sessions. Medicare paid for treatment that was actually just observation.

Grand Health Care System paid $21.3 million. The settlement involved 12 affiliated skilled nursing facilities accused of billing Medicare for therapy services that were unreasonable, unnecessary, unskilled, or that simply did not occur as billed. The pattern repeated across multiple facilities. The billing showed skilled rehabilitation. The reality showed services that didnt happen.

Life Care Centers paid $145 million – the largest SNF settlement in DOJ history. The company operates over 220 skilled nursing facilities nationwide. The government alleged they billed Medicare and TRICARE for unnecessary rehabilitation therapy services. The settlement resolved False Claims Act allegations. $145 million. And the company continues operating.

Think about what this means for your nursing facility. If your therapy documentation shows services provided to patients who were sleeping, sedated, or unable to participate, thats not a billing dispute. Thats healthcare fraud. The documentation that seemed like standard practice becomes the evidence that proves criminal intent.

The Production Quota Pressure

Heres something about nursing home fraud that reveals how corporate pressure creates criminal exposure. Production quotas for therapists lead directly to fraudulent billing – and the pressure to meet targets transforms legitimate rehabilitation into federal prosecution.

Therapy spikes at the end of measurement periods. Medicare reimbursement for skilled nursing depends on therapy minutes documented during measurement periods. Facilities discovered they could hit higher RUG score thresholds by spiking therapy at the end of each period. The timing of treatment was determined by billing cycles, not patient need. Patients who had been stable suddenly received intensive therapy – just before the measurement deadline.

Production goals drove unnecessary treatment. When facilities set therapy targets based on revenue rather then patient outcomes, therapists face pressure to document more services. The target wasnt patient recovery. The target was minutes documented. When your employer rewards you for billing more therapy – regardless of whether patients need it – the incentive structure creates fraud.

RehabCare paid $125 million to settle allegations. The company was the largest provider of rehabilitation services in nursing homes nationwide. The settlement resolved allegations they billed for therapy that was not reasonable and necessary. Production pressure at a national scale. $125 million in liability.

RegalCare faces DOJ lawsuit for fraudulent therapy billing. In 2025, the Department of Justice sued RegalCare Management Group and 19 affiliated skilled nursing facilities in Massachusetts and Connecticut. The allegations cover fraudulent therapy billing from 2017 through 2023. Owner Eliyahu Mirlis, executive Hector Caraballo, and therapy consultant Stern Therapy face personal liability. The corporate structure doesn’t protect individuals.

The Related Party Diversion Scheme

Heres something about nursing home fraud that reveals how owners extract money from facilities while patients suffer. Related party transactions create networks for diverting Medicaid funds – and the complexity of these schemes doesnt protect you from prosecution.

Owners create networks of related companies. The typical scheme works like this: nursing home owner creates management company, staffing company, supply company, and real estate company – all owned by the same person or family. The nursing facility pays each related company. Money flows through multiple entities. Medicaid funds intended for patient care end up in personal accounts.

Hagler and Rozenberg diverted $100 million while patients suffered. The New Jersey nursing home owners collected over $100 million from Medicaid while intentionaly understaffing there facilities. The understaffing resulted in widespread neglect. A death. Two sexual assaults. 3,400 calls to police for help from there facilities. Investigators found “a troubling pattern of mismanagement, self-dealing, and profiteering.”

New York Attorney General sued for $83 million diversion. Nursing home owners and operators allegedly converted more than $83 million in Medicaid and Medicare funds to enrich themselves through an elaborate network of related companies and fraudulent transactions. The money was supposed to provide sufficient staffing and required resident care. Instead it enriched the owners while residents suffered.

Centers Healthcare paid $6 million for cost report fraud. The settlement covered 44 skilled nursing facilities that submitted cost reports containing false statements about transactions with related organizations. The cost reports hid the true nature of related party dealings. Medicare paid based on false information. The scheme operated across 44 facilities.

Intentional Understaffing for Profit

Heres something about nursing home fraud that should terrify every facility owner. When you understaff intentionaly to save money while collecting full Medicaid reimbursement, you face federal prosecution – especialy when patients die.

Hagler and Rozenberg collected millions while residents died. The South Jersey nursing home owners intentionaly understaffed there facilities. They saved on labor costs. They collected full Medicaid payments. The result: widespread neglect, a death, two sexual assaults, and 3,400 calls to police. The state suspended them from Medicaid. An independent receiver now controls there facilities.

Understaffing while billing full rates is fraud. Medicaid payment rates assume a certain level of staffing. When you accept Medicaid reimbursement while providing substantialy less staffing then your cost reports claim, every claim is potentialy false. The savings from understaffing becomes the measure of your fraud.

Neglect becomes criminal exposure. Patient abuse and neglect in nursing homes triggers Medicaid Fraud Control Unit investigations. These units were created specificaly becuase Congress recognized that nursing home patients were “held hostage by the greed of facility operators.” When neglect results from intentional understaffing, the criminal exposure compounds.

Wrongful death suits multiply exposure. Philip Esformes faced more than 20 wrongful death lawsuits in addition to his federal criminal charges. The neglect that saves money creates civil liability on top of criminal prosecution. The residents who suffer become plaintiffs. There families become witnesses.

COVID Waiver Exploitation

Heres something about nursing home fraud that reveals how emergency programs became billing opportunities. COVID-19 waivers meant to help patients were exploited for profit – and the DOJ is now prosecuting.

Facilities put all Medicare-eligible residents through “observation.” When CMS issued COVID waivers, some facilities saw billing opportunity. Within one week of the waiver issuance, chains began putting all Medicare-eligible residents through “observation periods” whenever anyone was exposed to COVID-19. The observation wasn’t about patient care. It was about billing Medicare for skilled nursing services.

A California chain paid $7 million for waiver abuse. The settlement was one of the first False Claims Act cases involving COVID-19 waiver exploitation. The government alleged the chain fraudulently billed Medicare for skilled nursing services for residents who had no need for such services. The waiver that was supposed to help during a pandemic became a tool for fraud.

COVID-era billing patterns trigger ongoing investigation. Federal investigators are reviewing nursing home billing during the pandemic period. If your facility dramatically increased skilled nursing billing after COVID waivers were issued, that pattern is flagged. The spike in billing that seemed justified by emergency conditions may become evidence of fraud.

The Cases That Show What Happens

If you think federal nursing home fraud prosecutions are theoretical, look at what actualy happens to operators when these schemes collapse.

Philip Esformes received 20 years in federal prison. The Florida nursing home operator ran the largest healthcare fraud scheme in DOJ history – $1.3 billion. He paid bribes and kickbacks. He faced over 20 wrongful death lawsuits. A jury convicted him. Twenty years. His sentence was later commuted by President Trump, but the conviction stands as the benchmark for nursing home fraud prosecution.

Kevin Breslin received 90 months in federal prison. The New Jersey operator ran KBWB-Atrium facilities in Wisconsin, New Jersey, and Michigan. He diverted CMS funds intended for facility operations and patient care. $146 million in restitution. $8.4 million in forfeiture. The scheme involved unlawfully diverting funds for personal expenses.

Faith Newton received 12 years in federal prison. The Massachusetts healthcare operator was convicted of conspiracy to commit healthcare fraud, healthcare fraud, and money laundering. $99.7 million in restitution. 12 years. A $250,000 fine. Three years of supervised release after prison.

Joseph Schwartz received 36 months in federal prison. The New York nursing home empire owner was sentenced for his role in a $38 million employment tax fraud scheme. Arkansas is seeking to have him serve additional state time for Medicaid fraud and tax evasion even after a presidential pardon on federal charges.

Heres the uncomfortable truth about nursing home fraud prosecutions. When federal investigators examine your billing patterns, they compare your documentation to what actually happened in your facilities. They interview staff. They review medical records. They analyze whether your therapy volumes make clinical sense. The gap between billing codes and patient reality becomes the evidence that convicts you.

These arnt unusual cases. They represent standard enforcement outcomes. The sentences reach 20 years. The restitution reaches $146 million. The facilities that seemed profitable collapse when investigation begins.

How Nursing Home Investigations Begin

Heres something about how these cases develop that should concern every facility owner. Investigations often begin long before anyone contacts you.

Billing patterns trigger Medicare audit. If your facility bills significantly more therapy then similar facilities, thats flagged. If your therapy volumes spike at the end of measurement periods, thats flagged. If your RUG scores are consistently higher then regional averages, thats flagged. Medicare data analytics identify statistical outliers. Outliers trigger investigation.

Whistleblowers file qui tam lawsuits. Employees who witness billing fraud can file False Claims Act lawsuits and receive 15-30% of any recovery. That therapist who was pressured to document services that didn’t happen. That billing staff member who refused to submit claims they knew were false. That nurse who witnessed understaffing while full rates were billed. They can become government informants with financial incentive to expose everything.

State Medicaid agencies refer cases to federal prosecutors. State audits that reveal billing irregularities get referred to federal authorities. What starts as a state cost report review becomes a federal criminal investigation. The audit that seemed like routine compliance review becomes prosecution.

Family complaints trigger Medicaid Fraud Control Unit investigation. When residents suffer neglect, there families complain. Complaints to state agencies. Complaints to ombudsmen. Complaints that trigger MFCU investigation. The neglect that saved money creates the witnesses who destroy you.

Related party transactions attract scrutiny. When your cost reports show payments to related companies, auditors examine those transactions. If the payments exceed fair market value, thats red flag. If the related companies provide no real services, thats fraud. The corporate structure that seemed like asset protection becomes evidence of diversion.

What You Cannot Do When Investigated

Heres what people do when they learn about nursing home fraud investigations. They panic. They try to fix things. They make decisions that create additional criminal exposure.

Do NOT destroy medical records or billing documentation. Therapy notes, medical records, billing files, cost reports. Destroying any of this is obstruction of justice. The government probly already has copies through Medicare claims data. Destruction proves consciousness of guilt.

Do NOT alter therapy documentation retroactively. If your records show therapy provided to sleeping patients, your natural instinct is to change the documentation. Dont. Altering records is additional fraud. Document creation dates can be forensicaly determined. The cover-up becomes additional charges.

Do NOT contact therapists or staff to coordinate stories. If employees witnessed problematic billing practices, your natural instinct is to talk to them. Dont. They may already be cooperating with the government as whistleblowers. Your conversation could be recorded. Coordination is witness tampering.

Do NOT assume the audit will resolve quietly. Nursing home operators often think Medicare audits are routine billing disputes. By the time federal investigators contact you, the audit phase is over. They have billing patterns. They have employee interviews. They have patient records. You need an attorney before you say anything.

The False Claims Math

Heres something about nursing home fraud that exponentialy increases legal exposure. False Claims Act penalties apply per claim – and every therapy session is a seperate claim.

How the multiplier works. Each false claim carries penalties of up to $27,894. A skilled nursing facility billing 50 therapy sessions per day creates 50 potential false claims per day. Over a year, thats over 18,000 claims. At maximum penalties, thats theoretical exposure exceeding $502 million from False Claims Act liability alone.

Healthcare fraud adds criminal exposure. 18 U.S.C. 1347 provides up to 10 years imprisonment per count of healthcare fraud. If the fraud causes serious bodily injury, thats 20 years. If the fraud causes death – and nursing home neglect kills people – the sentence can be life imprisonment. Anti-Kickback violations add up to 10 years per count. The civil penalties stack on top of criminal sentences.

Treble damages multiply everything. False Claims Act provides for treble damages – three times the amount defrauded. If your billing fraud cost Medicare $10 million, treble damages equals $30 million. Plus per-claim penalties. Plus criminal fines. Plus restitution. Life Care Centers settlement of $145 million shows the scale of exposure.

Mandatory exclusion from federal healthcare programs. Conviction for healthcare fraud triggers mandatory exclusion from Medicare and Medicaid. You cannot bill federal programs. You cannot operate facilities that bill federal programs. Your career in nursing home operations is over.

Criminal penalties apply to individuals. Corporate settlements dont protect individual owners, operators, and executives. Kevin Breslin got 90 months despite corporate involvement. Faith Newton got 12 years. The company may survive. You go to prison.

What You Should Do Right Now

If federal investigators have contacted you about nursing home billing, or if your billing practices might trigger scrutiny, heres exactly what you should do:

Contact a federal healthcare fraud defense attorney immediately. Not a general business lawyer. Not your malpractice carrier. Someone who specificaly handles federal healthcare fraud cases and understands skilled nursing facility prosecution.

Do NOT speak to investigators without counsel. Federal agents may approach you or your staff for “voluntary” interviews. There is nothing voluntary about it. Anything said can be used to build the case against you. Politely decline and contact an attorney immediately.

Preserve all documentation exactly as it is. Therapy records, medical documentation, billing files, cost reports, staffing records. Do not alter, destroy, or organize anything. Document preservation is critical.

Identify all potentially problematic billing patterns. Therapy documented for patients who were sleeping or unable to participate. Production quotas that pressured therapists. Related party transactions that may lack business justification. Your attorney needs to understand the full scope.

Do NOT discuss the investigation with staff or related party vendors. Anyone you talk to can be compelled to testify. They may already be cooperating with the government. Only attorney-client communications are protected.

Todd Spodek tells every nursing home operator in this situation the same thing: federal nursing home fraud investigations are serious criminal matters. Philip Esformes got 20 years for the largest scheme. Kevin Breslin got 90 months for diversion. Faith Newton got 12 years. Your response in the next few days could determine wheather this becomes a matter that resolves favorably – or federal charges that destroy your facilities and your freedom.

Call Spodek Law Group at 212-300-5196. Before you speak to federal investigators. Before you make decisions that create additional criminal exposure. Before a billing practice becomes a federal fraud prosecution.

Federal nursing home fraud is an enforcement priority. Congress created Medicaid Fraud Control Units specificaly to prosecute nursing home operators. The sentences reach 20 years in federal prison. The restitution reaches $146 million. What you do right now matters enormously.